Watching the stock market plummet can be particularly unnerving for most investors.
The fear of incurring major losses could make it extremely tempting to sell your investments. Yet while this may temporarily alleviate your nerves, doing so could put a significant dent in your long-term gains.
Here are some tips to stay calm.
1. Focus on your goals
If you are investing, you most likely have long-term goals for your money – such as saving towards retirement, or your children’s school fees.
Focusing on these can help ensure you aren’t distracted by current events, so that they don’t prompt you to veer off course.
By leaving your money invested in the stock market, you increase the chances of it growing and building a substantial pot over the long term. However, past performance isn’t a guarantee of future performance.
2. Take solace from history
The world has endured plenty of huge shocks, from wars to deep global recessions. History has shown that over long enough time periods, no matter what challenges the global economy has faced, markets recover from significant downturns – and may go on to recover strongly.
By leaving your money invested, investment trends show that increases the chances of it growing and building a substantial pot.
3. Don’t check your investments!
Limiting how frequently you check your portfolio is generally good for your financial, and emotional well-being.
Otherwise, you may feel an urge to act on a sharp downturn – and crystallise losses you would otherwise have made up over time. Remember that second-guessing market moves is impossible, even by the experts.
4. Remember that investing beats cash
Savings accounts typically struggle to keep pace with inflation, seeing savers lose value in ‘real’ terms.
If you are prepared to accept the risk that comes with investing, and have time on your side, you give your wealth the greatest chance of growing and beating inflation over the long term.
5. Stay diversified
Ensuring you hold a diversified portfolio that contains a mix of assets – equities, bonds, property and cash – makes sense. Each may perform differently in similar market conditions; some lose value, while others make gains. Over time, this helps to smooth returns.
Remember, as the old investment adage goes, it is time in the market – not timing the market – which is typically key to long term gains.
The value of investments and any income from them can fall and you may get back less than you invested. Past performance is not a guide to future performance and performance. Opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd.